* World equities rally after Q3 U.S. GDP expanded 3.5 pct
* U.S. economy posts first qtrly growth in over a year
* Dollar, Treasuries down; oil rises to near $80 a barrel (Recasts; updates with U.S. markets close)
By Jennifer Ablan
NEW YORK, Oct 29 (Reuters) - World stocks rallied strongly on Thursday after U.S. gross domestic product data showed the world's biggest economy returned to growth last quarter following the worst recession since the Great Depression.
The data showed the economy grew at an annual rate of 3.5 percent in the third quarter compared with a forecast for 3.3 percent, allaying fears of a prolonged slowdown. For details, see [ID:nN29354547]
Strategists and traders were surprised as some had been downgrading their outlook after disappointing data in recent days.
"The market was beginning to price in a weaker outlook, but today's GDP report was good across the entire spectrum," said John Spinello, chief Treasury strategist at Jefferies & Co in New York.
For their part, top investors around the world rebuilt equity holdings during a shaky October for stock markets on the view that the economy would not fall back into recession given accommodative central bank policies. [ID:nLAG005871]
The MSCI world index <.MIWD00000PUS> turned positive after the data, rebounding from three-week lows on Wednesday, the index's biggest one-day selloff since August. At the close, the index was up about 1.62 percent.
Wall Street equities indexes also rallied. The Dow Jones industrial average <.DJI> ended up 199.89 points, or 2.05 percent, at 9,962.58, while the Standard & Poor's 500 Index <.SPX> was up 23.48 points, or 2.25 percent, to 1,066.11. The Nasdaq Composite Index <.IXIC> rose 37.94 points, or 1.84 percent, at 2,097.55.
In Europe, the FTSEurofirst 300 index <.FTEU3> jumped 1.76 percent, reversing earlier losses of around 0.2 percent.
Emerging market stocks <.MSCIEF>, which had suffered heavily from this week's global shakeout and retreat from risk, recovered from early losses to trade up 0.84 percent.
In energy and commodities prices, U.S. light sweet crude
oil
The Reuters/Jefferies CRB Index <.CRB> was up 5.77 points, or 2.13 percent, at 276.16.
BONDS VOYAGE
Treasury debt prices fell as the GDP figures suggested the U.S. economy would emerge from recession faster and as stocks advanced.
The benchmark 10-year U.S. Treasury note
At the longer end of the yield curve, the 30-year U.S. Treasury bond
In addition, the dollar eased against a basket of major currencies. The U.S. Dollar Index <.DXY> was last at 75.983, down 0.58 percent from a previous session close of 76.425.
The euro